Michigan House panel votes to tax Internet sales

LANSING, Mich. (AP) — Michigan lawmakers on Wednesday took a step toward forcing some online retailers to collect the state’s sales tax on purchases in hopes of leveling the playing field for brick-and-mortar businesses that have to assess the tax.

Without debate, the House Tax Policy Committee took bipartisan 9-1 and 9-2 votes to send two bills to the full Republican-led House, where their fate is uncertain. A handful of Republicans and Democrats on the panel abstained from voting.

Retailers such as Wal-Mart must collect the state’s 6 percent sales tax when selling goods over the Internet. But Internet-only retailers such as Amazon and Overstock do not have to collect it unless they have a physical presence in Michigan.

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Some lawmakers see the legislation as a tax increase, while others say it is a federal issue.

House Speaker Jase Bolger declined to say if he supports the plan. His spokesman, Ari Adler, said Bolger believes it is a federal issue.

“But we are looking at it because, once again, the federal government isn’t doing its job,” Adler said. “The question for the speaker right now is whether the state should be addressing it and, if so, if this bill is the right way to do so.”

There are disputes about whether Amazon already has such a presence in the state because one of its subsidiaries, an audiobook publisher, is based in Grand Haven. The measure in part would clarify that Amazon and other Internet companies working through affiliate websites in Michigan have to collect the sales tax.

The legislation is limited in scope because of the estimated $482 million in tax revenue from remote sales that will be owed in the next budget year — nearly 60 percent of it from e-commerce — the state could see less than $50 million if the measure is enacted.

Shoppers currently are required to pay unpaid taxes on online, catalog, mail- and telephone-order purchases when they file their state tax returns. But few taxpayers comply, paying less than $6 million this year.

Only Congress can give states the authority to collect sales taxes from all online sales under a 1992 U.S. Supreme Court ruling. The U.S. Senate in May passed a bill limiting tax-free shopping on the Internet, but the House has been more hesitant despite lobbying from traditional retailers and cash-strapped states.

With Congress reluctant to act, traditional stores are turning to the states.

“It’s long overdue. It is much appreciated,” James Hallan, president and CEO of the Michigan Retailers Association, said of the committee vote. “Retailers need to compete fairly, equally and this does level the playing field.”

“This is not a new tax on the books. This is an enforcement issue,” Hallan added.

Democratic Rep. Vicki Barnett of Farmington Hills said she passed on voting because state treasury officials could not say how the additional tax revenue, which is growing 6 percent a year, would be classified. Most sales tax revenue goes to schools while most use tax money is earmarked to the general fund.

The nonpartisan House Fiscal Agency says it “appears” the majority of revenue would be classified as sales tax.

“If I’m going to increase taxes on consumers, I need to be able to tell them what they’re paying for,” Barnett said.

She said Amazon and Overstock recently asked the U.S. high court to overturn a New York law that is similar to what is being proposed in Michigan.

“There’s so many questions up in the air,” Barnett said.

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Online:

House Bills 4202-03: 1.usa.gov/15Sgz7i

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Email David Eggert at deggert(at)ap.org and follow him at http://twitter.com/DavidEggert00